Spam, email viruses, and economics

If you’re like
me, you are starting to dread the Monday morning inbox on your email program.
I routinely get very familiar with my delete key as I weed the unsolicited
junk email, aka spam, from my system. This routine has gotten a bit more
interesting as of late with the latest round of email viruses such as the
famous “love bug.”

The phrase “You
may already be a winner” has now been replaced by “Make $$$ from home”
and “lose 50 pounds in 2 weeks!”.

It’s not that
much of a pain to delete messages, but certainly the cumulative time, day
after day, and across millions of computer users, certainly adds up. (Say,
2 minutes a day times 93 million users times 10$ an hour times 260 week-days
/ year = $8.06 Billion/year or about 0.1% of GDP.)

I was thinking
about ways that I could protect myself from junk email and the next round
of email viruses. I do use a spam filter which catches the worst offenders
on one of my email addresses, and my virus protection does a decent job,
but there are holes.

Most of the solutions
that I have seen involve a reaction to an email that was sent – for example,
by contacting the ISP of the offending email address. On the virus side,
a virus protection program helps, but I still have to deal with the emails
set to be from the people I know who are not protected.

Both of these
solutions to the spam problems, however, have a large downside – they involve
non-trivial costs. A good virus protection program costs around $40; and,
if I spent all of my time tracking down spammers and complaining, I wouldn’t
have time to complain about them here.

The Free Rider
Problem

The problem with
these “solutions” to the spam and email virus problem is that the costs
to any individual of stopping the latest junk email far outweigh the benefits
to that individual. However, if a spam email is stopped, the benefit is
then multiplied by a large number of users.

Therefore, it
may be the case that stopping spam or email viruses may have aggregate
benefits that are greater than the costs of prevention, but no individual
has the incentive to combat the spam; and so the spamming goes on unabated.

This description
of the emails and viruses problems is a subset of a larger class called
“free-rider” problems in economics. The free rider problem arises whenever
there is an incentive for someone to enjoy the benefits of a good or service
without having to pay for it. In this case the “good or service” is “no
spam.”

For a free rider
problem to exist, the good must have some characteristics of a public
good. Namely, it must be impossible (or at least difficult) to prevent
others from receiving the benefit once the good has been provided (non-excludable).
Public goods also have the property that one person’s use of the good does
not preclude or diminish other’s use of the good (non-rival).

Anti-spam measures
and email virus protection falls neatly into both of these categories.

A Solution?

When goods exhibit
one or both of these goods there then is a the potential for the government
to come in and improve over the outcome that would be achieved by the market
alone.

When goods do
have the properties of public goods mentioned above, the market tends to
provide too little of the good – there is not enough anti-spam activity
in this case. The government may then be able to come in and improve the
outcome.

One way some (primarily
state) governments have tried to do this has been to pass anti-spam laws
– for example, Washington state two years ago passed a law allowing spam
recipients to collect $500 in damages per email message. However, even
with strong anti-spam laws, there may still be a free-rider problem. Pursuing
legal action against those that send the email still takes time, and the
benefits of successful litigation or police action still go to a large
number of people, most of whom are still free-riding.

For those pesky
email viruses, there is an easier solution – the government should enact
policies to increase the use of virus protection programs. One way to do
this would be to provide a subsidy for purchases of anti-virus software.

Unfortunately,
there is still no low-cost magic bullet for individuals to use against
email spam, and until there is, there may be a role for an active government
in this fight.